Given its use in semiconductors, palladium has seen increased demand that correlates with heightened demand for chips, especially in Asia, where it has surpassed gold.

Supply chain issues have been racking Asia, but manufacturers of computer chips are back in business, even with the latest COVID-19 variant, Omicron, lurking in the shadows. This caused palladium to outpace gold during Tuesday’s trading session, and more strength could be ahead.

A stronger dollar and a return to form for the stock market is doing no favors for gold. Despite the Omicron variant, the equities market has rebounded from the post-Thanksgiving sell-off due to the pandemic.

Gold prices should be benefiting more from the fear of inflation, but the dollar continues to operate strength to strength. On the opposite end of the spectrum, palladium has a wider use case than gold, making it more industrious as the economy continues to rebound.

“Palladium prices have not participated in what was supposed to be a super commodity cycle as the global shortage of semiconductor chips derailed its demand,” said Edward Moya, senior market analyst for OANDA.

An ETF for Potential Palladium Investors

Rather than play the commodity directly by holding physical palladium or trading spot prices, investors can also opt for exchange traded funds (ETFs). An ETF wrapper could potentially shield investors from the volatility that they would have experienced by trading the actual commodity itself.

Investors expecting palladium prices to keep gaining strength can opt for the Sprott Physical Platinum and Palladium Trust (SPPP). SPPP provides a secure, convenient, and exchange traded investment alternative for investors who want to hold physical platinum and palladium.

Palladium momentum should start picking up, especially now that Asia is full steam ahead with chip manufacturing. Semiconductors have been in high demand, especially in the automotive industry, but there’s not enough supply to match.

“Recently, manufacturing facilities across Asia restarted their machines, producing everything from shoes to computer chips,” a Capital.com article notes. “Many Asian nations instituted a gradual return to work policy in late summer and early fall, bringing a bit of stability to the region’s manufacturing sector.”

This, in effect, should translate to more stable palladium prices.

“Palladium should start to stabilise now that supply chain issues are improving and as China starts to ease. Palladium is starting to look a lot more attractive than gold as its demand outlook is looking a lot better,” Moya said.

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